FOR IMMEDIATE RELEASE
Media Contact: Nicole Vasile
Director of Communications
Nicole.Vasile@ciab.com
Survey Contact: Zachary West
Market Intelligence & Insights Associate
Zach.West@ciab.com
THE COUNCIL’S MARKET SURVEY CITES INFLATION AS PRIMARY FACTOR IN PREMIUM PRICING TRENDS
WASHINGTON, D.C. – Market conditions remained challenging in Q3 2022, with respondents reporting an average premium increase of 8.1% across all account sizes, up from 7.1% in Q2 2022. Even though this was the 20th consecutive quarter of increased premiums, respondents did acknowledge the increases were relatively slight, describing them as “close to flat.”
Premium pricing moderation continued for most lines of business, with a few exceptions. Commercial property, for example, saw premiums rise an average 11.2% in Q3 2022, compared to 8.3% in Q2. Commercial auto and cyber also saw notable increases, at 7.6% and 20.3% respectively.
Workers compensation premiums continued their decline this quarter, at -0.7%. Respondents described underwriting for that line as “flexible” and “loose,” and stated that the line was “still very soft.”
Inflation was cited most often by respondents as one of the main reasons for commercial property and commercial auto woes, primarily due to its effect on cost of goods. Increased construction and replacement costs resulted in underwriters requiring higher property valuations when writing or renewing coverage, which in turn led to upward pressure on premiums to cover the higher exposure from the increased value of the property. Likewise, inflation led to increased repair and vehicle replacement costs, contributing to higher auto claims and higher premiums to mitigate those losses.
Natural catastrophes also contributed to commercial property premium increases, possibly stemming from events like Hurricane Ian or the flooding in Kentucky and Tennessee. Respondents pointed to significant rate increases, capacity restrictions, and increased deductibles for properties with natural catastrophe exposure, as well as lower limits.
Cyber was also a challenge for brokers in Q3 2022, though the average premium increase for the line this quarter was 20.3%, down noticeably from 26.8% in the previous quarter, and down significantly from its record high peak of 34.3% in Q4 2021. Some brokers believed premiums had stabilized slightly for the line, especially if insureds implemented appropriate risk controls. However, clear problems remained, such as higher deductibles, and the addition of sublimits to ransomware and cyber extortion coverages, even if the account had a clean loss history.
Respondents believed current market conditions would allow them to show their value to clients. According to a respondent from a midsized Midwestern firm, “helping to educate clients on the overall market, risk mitigation techniques and emerging market risks will be critical to client retention.” In the words of a third respondent from a large Midwestern firm, “If you can’t offer a client services and tools to help them make risk improvements in their business, you will be relegated to being just another vendor who can give them a policy.”